His ERA started to balloon in June. I agree with whoever suggested trying him out of the bullpen. His splits suggest he'd be a good setup man. Innings 1-3 he's not bad. He starts going south after three innings and after six innings he's plain awful.
ERA is a flawed stat. I'd be more concerned with the number of homeruns he gave up this year. His ERA could've been affected by having hacks playing defense behind him: FLop, Belliard, Young, et al. Guys with no range who can't get to balls average players can.
Actually, I think your theory of good for 1-3 innings would suggest he'd make a good long reliever. Why bury him in a set-up role when he can go longer than 1 inning? Besides, with his homerun numbers, set-up could be a disaster.